India Markets Wednesday Wrap-Up: Mid and Small Caps Shed Nearly 4%

After a relatively strong start the Indian indices failed to make inroads into the positive territory in the latter half of the session today. This was despite selective buying interest in stocks from the auto, banking, construction and pharma sectors. The Indian stock markets once again featured amongst the key losers in Asia today. The BSE-Sensex closed with losses of around 183 points (down 1.0%) whereas the NSE-Nifty closed 59 points lower (down 1.1%). BSE Midcap and BSE Small cap indices took a heavy beating today, closing lower by 3.6% and 4.3% respectively.

Asian indices closed mixed today whereas Europe has also opened on a positive note. The rupee was trading at Rs 45.47 to the dollar at the time of writing.

As per the latest data from the Society of Indian Automobile Manufacturers (SIAM), car sales in India rose 26% YoY in January 2011, defying an expected slowdown in demand. Despite higher interest rates, easier access to loans and a wider choice of models kept up the pace of growth in Asia's third largest economy. It may be noted that vehicle sales in India, one of the fastest growing auto markets in the world, grew 31% YoY in 2010, but that growth is expected to slow to 15% YoY in 2011 amid rising interest rates, fuel prices and vehicle costs. Maruti Suzuki, India's top carmaker, posted a 14.7% YoY rise in January car sales. Tata Motors (NYSE:TTM), which makes commercial vehicles and cars, posted a 15% YoY rise in January sales. Utility-vehicle maker M&M saw 22% YoY growth.

Indian automakers sold 184,332 cars in the first month of the year, according to data from SIAM. Sales of trucks and buses, a key indicator of economic activity, rose 12.6% to 60,753 units last month. However, the company managements have indicated that the current pace of growth is unlikely to sustain.

Virtually in line with estimated loss pointed out by Comptroller and Auditor General (CAG) in 2G spectrum allocation, telecom regulator TRAI today recommended Rs 109 bn for a pan-India license with 6.2 Mhz spectrum. Going by this valuation, six new pan-India licenses given in 2008 would have garnered Rs 654 bn to the government along with additional revenue from other firms who were given licences in fewer circles. The impact of this on the telecom sector is yet to be seen.

The CAG had estimated loss of up to Rs 1.76 lakh crore from 2G spectrum allocation. In addition, the CAG has placed the probable loss to the exchequer due to a deal between ISRO's commercial arm Antrix Corp. and a private firm called Devas Multimedia Private at about Rs 2 trillion. Interestingly, this scam has not involved the sale of any spectrum. The ISRO had to build transponders for Devas but no spectrum sale has taken place as of now. In fact, the government had decided in 2008 that it would be taking back the questioned 'S-band' spectrum that was required for this deal.

Meanwhile M&M declared 3QFY11 results today. Standalone revenues rose by 36% YoY during 3QFY11 led by growth in both the segments - automotive and farm equipment (each up by about 36% YoY). The company's operating profits rise at a marginally sharper pace (as compared to sales) as operating margins expand by 0.2% YoY to 15.1%. Margin expansion was led by lower employee and other expenses (as a percentage of sales). Net profits increased by 78% YoY. Apart from a strong operating performance, higher other income, a benign increase in depreciation charges and an exception income of Rs 1.2 bn led to a sharper rise in profits. On excluding the extraordinary income, profits rise by 49% YoY. During 9mFY11, standalone revenues and profits rose by 26% YoY and 36% YoY (adjusted for extraordinary items during both the periods). Consolidated total income (gross revenues and other income) and profits rose by 21% YoY and 74% YoY respectively during the quarter.